(LIFT)/ UNOPS Dry Zone Program Inception Mission 14-30 October

MYANMAR Livelihoods and Food Security Trust Fund (LIFT)/ UNOPS

Dry Zone Program Inception Mission 14-30 October 2013 Aide-mémoire

The Inception Mission was the first of a three step process, intended to focus on validation of the proposed program area, and on provision of main sector focus for the program. Accompanied by LIFT FMO team members the mission visited a total of 28 villages in 8 Townships, of which 5 in Mandalay Region (Kyaukpadung, Mingyan, Taungthar, Natogyi and Mahlaing), and 3 in Magway Region (Pauk, Seikphyu, Myaing). The five Mandalay Townships were identified by LIFT on the basis of vulnerability classification carried out by a major JICA pilot project, while the three in Magway were included to look at possible synergies with the 3MDG program operating there.

The village visits were based on a semi-structured participatory approach focusing on discussion of a main topics list, but without fixed questions, and allowing the discussion to follow directions raised by the participants. The discussion group-size varied from 50 to about 100 community members, representing formal as well as traditional village leaders (respected elders and government village leaders), Village Development Committees (where formed by NGOs), single purpose interest groups (such as water management associations), Women’s associations, Parent-Teacher Associations, Mother and Child groups, social and religious groups, landowners/farmers, landless people, migrant workers and people with disabilities. At least half of the community members present at the village meetings were women, some representing female-headed households.

The main topics covered included agricultural production, rainfall, livestock, credit, markets, migration, food security and household diets, health and education. All village visits were accompanied by the Township Planning Officer and in some cases other officials. Substantive meetings were also held in each Township under the aegis of the Planning Officer and including Agriculture, Rural Development, Livestock and Industrial Crops Township Officers. Planning Officers also supported village identification. The mission also visited the vocational training centre of ADRA in Myit Chae, in Pakokku Township.

After the field visits the team also held meetings in NayPyiTaw with the Ministry of Agriculture and Irrigation, the Ministry of Livestock, Fisheries and Rural Development, and Yezin Agricultural University to present the preliminary findings of the mission and seek feedback. Meetings were also held for the same purpose at the field level and in Yangon with 10 national and international NGOs working with LIFT, and also with WFP to discuss the ongoing food security and nutrition survey.

Main findings

Program area and targeting - The classification of Township areas on the basis of JICA rankings of vulnerability I to III (IV and V areas were not considered) appears to be based on aggregate statistical indicators that are not clearly perceptible on the ground. The scale of difference between a class I and class II Township does not appear to be of such a magnitude as to override the very significant differences within townships. It is possible that a full validation of all Dry Zone townships may find a real correlation (although most JICA pilot project data is now 9 years old), however a better criteria for Township targeting would appear to be the use of agroecological zone data such as that included in the ongoing WFP- SCF food and nutrition security survey. Preliminary information from this study suggests that food and nutrition security conditions in lowland areas with access to irrigation are substantially better than others, while upland and hill areas share roughly similar conditions. All five Mandalay townships fall within the hill area where most rural livelihoods are based on a mixture of cash cropping (pulses and oil seeds) and livestock. In summary, within township variability appears to be much higher than between township aggregate variability.

Within the villages surveyed, the presence of substantial community based development programs in the past years appears to have produced significantly improved conditions, albeit starting from a very low baseline. Such villages would most likely not be a first priority for the LIFT Dry Zone program, nor would Townships with a high concentration of such villages. This needs to be specifically considered for the township of Kyaukpadung, where a large UNDP community development was operational for approximately a decade up to 2011. While villages in the Township can certainly benefit from additional support, the needs of adjacent townships that to date have benefited from little or no development assistance should be considered a priority. It is therefore recommended that in Mandalay Region the program focus on the Townships of Mingyan, Taungthar, Natogyi and Mahlaing, with a total aggregate population of 1,265,240, and a rural population of 1,042,215 (GoUM data 2004).

In terms of within-township targeting, Township Planning Officers appear to be able to provide an important level of support in terms of vulnerable agroecological zone identification and information on specific villages. During the inception mission they were able to describe at a mapping level the characteristics of certain villages and their poverty profile, later ascertained by the team to have a good degree of correlation with conditions on the ground. Key predictors of village poverty and food insecurity levels appear to be a) soil quality, b) cropping types (presence of paddy) c) distance from sealed road d) presence of development or major government programs and e) scale of migrant remittances. All but e) are relatively easy to ascertain. The WFP-SCF study now underway is also likely to provide very significant contributions to within-township targeting, and it is recommended that general decisions on program areas within townships – and thus village selection, be kept on hold until the full study is available.

The inception mission found that within poor and food insecure villages even the wealthiest members of the community face significant challenges and often carry high debt loads. Exclusion of village “elites” (relatively speaking) runs the risk of creating a group hostile to a

2 program they will not benefit from, leading either to attempts to capture resources or block the program if they are unable to do so. The standard village unit generally involves strong family ties and traditional linkages, suggesting the importance of including 100% of the population in the program, although with varying levels of assistance depending on needs. While the entire village should be included in the community development approach, material resources should be weighted towards those most in need, while still providing tangible benefits to all.

Based on the assumption of whole-village coverage in 4 Townships with a rural population of approximately 1 million persons, a decision of village coverage needs to take into consideration the preferred balance of program “depth versus breadth” , i.e. preference for a more intensive approach addressing a smaller number of beneficiaries versus a broader program of less intensity. Given that for many, if not most, of the program areas this will be the first major development program in their experience, and the number of program areas to be addressed, the inception mission recommends a relatively “deep” approach, while still achieving a justifiable geographical coverage. Comparison with the cost intensity (program cost per beneficiary) of programs now operating in the area through international organizations suggests that a USD 30 million program following these criteria could address the needs of approximately 180,000 persons, equal to 36,000 households. Given an average village size of approximately 100 households this would be equal to 360 villages.

Key vulnerability factors to be considered by the program design exercise include:  Limited natural resource base of the area, especially in terms of poor soils, highly erratic rainfall patterns and limited absolute precipitation (compared with the rest of Myanmar), land degradation and poor infrastructure  High population density of the Dry Zone in general and the proposed project townships in particular  Risk aversion of the population due to extreme poverty and lack of coping mechanisms  Limited capacity of Government institution outreach into rural areas  Low levels of health infrastructure and education services above primary education  High degree of reliance on remittances from seasonal or long term migration

Proposed thematic areas for the program

Further to extensive discussions with rural communities, Government actors at the Township and Union level, LIFT partner NGOs and the LIFT FMO and FB, the inception mission team proposes that the Scoping mission focus on five potential program areas: Credit, Farm Technology, Value Chains, Water Supply and Social Protection.

Credit availability lies at the heart of farmer vulnerability to poverty and food insecurity. Access to affordable productive credit is a prerequisite for engagement in agriculture,

3 livestock, petty trading and migration, the main activities of the Dry Zone. Credit is currently available in the form of MADB loans which, according to all surveyed villages, is universally provided at 2% monthly interest. This is in contrast with results of the recent WB study of the MADB which claims credit is provided at 8% annual interest. It is not clear if credit has ever actually been provided at the 8% figure or was only announced (as stated by PACT). A maximum of 20,000 MMK per acre is provided for upland crops (while 5 times that amount is provided for paddy land), and the maximum amount available to a single farmer is generally in the range of 100,000 MMK. Townships are held collectively accountable for repayment of MADB credit, which is thus strictly enforced by the risk of collective credit exclusion in the following year.

Commercial credit, used to make up the shortfall in availability of MADB loans, is normally negotiated with money lenders and traders in major towns, either Village Tract centers or Townships. Local elites are generally borrowers in their own right and do not have surplus capital to invest in loans. Credit secured by gold or land tenure is provided at 5% monthly interest, while unsecured credit is harder to obtain, amounts are smaller, and interest is usually in the range of 10% monthly, although figures of up to 20% monthly were noted. Because of the imperative to refund MADB loans, farmers often take out commercial credit to pay these in case of lost or reduced harvest, even at very high rates. Loans secured by land tenure can be interest free, but transfer the use of the land temporarily to the lender, making reimbursement difficult. Failure to reimburse such loans for three consecutive years results in permanent transfer of tenure to the lender.

With farmers requiring a minimum of 100,000 MMK per acre for seeds, fertilizer and labor, an average farmer with 5 acres would be paying a minimum of 150 000 MMK (secured credit at 5%/month for 6 months) and a maximum of 300 000 MMK (unsecured) for their required farm inputs, which is likely to exceed their farm profit in anything but optimal years. The current microfinance law sets the maximum monthly interest rate at 2.5%, which is the standard rate of most providers such as PACT. Availability of microcredit products for small livestock and trade activities could also boost local opportunity. The ubiquitous Chinese motorbikes used for rural transport of people and goods for example cost in the range of 500 000 – 700 000 MMK, and can provide income of up to 10 000 MMK per day.

Given the complexity of establishing sustainable new microfinance programs, it is recommended that the scoping mission look closely at existing providers to determine which could be in condition to adapt and expand their services to the project zones.

Farm technology is an area where there is scope for improving productivity and profitability of farmers in the dry zone. The program will focus on areas that currently specialize in production of pulses and oilseeds in a mixed cropping system that also includes cattle as the exclusive source of farm power, pigs sheep and goats for fattening and sale, and chickens for local consumption. The team noted that farmers in the area are well acquainted with different relay cropping and intercropping systems used to make the most of the short and unreliable monsoon patterns, spreading risk over a number of crops. The most common pattern is for intercropping of pigeon pea, sesame and black gram at the start of the first monsoon. The

4 sesame is considered a “gambling crop” with high risk failure but potentially high yields, and in case of rain failure in July will be replaced with chickpea or groundnuts for the second half of the monsoon. The pigeon pea is left in the ground until the end of December to absorb all residual moisture. Most farmers apply some quantities of manure for base fertilization, 50 kg/acre of urea and 25 to 50 kg of compound fertilizer (15/15/15). In some cases groundnuts are relay cropped in two cycles with different maturing varieties for the first and second cycle of the monsoon.

Farmers are well acquainted with fodder cropping, generally sorghum but occasionally maize (which almost never reaches seed setting) and some fodder shrubs. There could be considerable scope to introduce leguminous fodder shrubs trees on land too degraded for agriculture, both for soil stabilization and livestock feed. Expanded fodder production, combined with improved veterinary procedures (vaccinations, worming, etc.) and improved animal management, could significantly increase earnings from livestock related activities.

Cattle are used exclusively for farm power, with almost no milk or meat production, and sale only as a coping strategy. Small farmers often do not have cattle and rent those of wealthier farmers after they have finished their own tillage, at less than ideal farming times. Plough technology is extremely primitive, and there is scope for simple improvements in farm equipment, possibly through local blacksmith training, which could increase work rates (currently 8 hours of plowing per acre, or 2 days for a pair of bullocks) and provide better litter burial. Hardpans and drainage are generally not an issue on the very sandy soils of the area.

Seed quality is generally quite poor, although the stated objective of the Government is to provide quality farmer seeds (QDS equivalent) every three years, in reality farmers re-use open pollinating varieties for extended periods, and purchase seeds of unverifiable purity from local traders. Many seed lines are currently 10-15 years old and have accumulated significant pest and disease problems. There is also scope for (cautiously) testing other drought resistant crops that may be adapted to local soil conditions, in order to move beyond the current range of crops, bearing in mind however the high risk aversion already noted.

Some development programs have attempted to introduce compost production programs, which have generally had very low uptake rates. Farmers complain about the high labor inputs involved compared to the volume produced, and the difficulty of sustaining compost cycles during the dry season. While fertilizer appears to be readily available (mainly Chinese production), the quality is variable and costs very high (around 20,000 MMK/ 50 kg bag for urea and 33,000 MMK/50 kg bag for compound 15/15/15). Fertilizer is broadcast by hand, and there is scope for improving application methods to reduce use, especially in light of the relatively low precipitation levels. There is very limited knowledge of pest and disease management; although Township Agriculture Officers have recently received training in IPM, there are currently no resources to extend such training to village level farmers.

Value chains are a critical area of work for the proposed program, given that the primary sources of livelihood in the program area are based on cash cropping and livestock for trade.

Farmers are exposed both to climate/crop risk, and secondarily to market risk in the process of procuring their basic rice staples. While there is a substantial amount of research that has been carried out on the macro analysis of value chains for pulses and oilseeds, little of this reaches down to the farmer household level to see how larger market trends are impacting on poverty and food security. During the mission several general assumptions about oil production in the region (traditionally referred to as the “oil jar of Myanmar”) were discussed with farmers and found to be rather weak. Sesame has become such a valuable crop in seed form that large volumes are traded to China without being pressed, and many small oil processors have in fact become traders, buying sesame at harvest for as low as 20,000 MMK/Basket (24.5 kg for sesame) and re-selling it just three months later for up to 35,000 MMK/basket. Reports generally state that rural consumers are entirely dependent on cheap palm oil imports (at around 1800 MMK/Viss) and use no sesame or groundnut oil, whereas it was noted that only the poorest use pure palm oil, and a wide range of mixtures of different percentage are used.

At present very little value is added at local level, with farmers selling sesame to small scale millers, buying back the seed cake for pig feed, and in some cases buying back small quantities of oil. Groundnut is also sold for processing, and although the seed cake cannot be used as feed, it is sometimes sold as soil conditioner.

Piglets are generally purchased on the market for fattening on purchased feed, and then sold for cash. Most farmers claim that they make little or no profit raising pigs, but that it is an effective mechanism for savings, as once having made the investment in a piglet they are obliged to continue investing in feed until it is ready for sale, with the added risk of complete loss to swine flu, or additional cost for vaccination. Sheep and goats are raised exclusively for sale, with apparently no tradition of milk production. While wool used to be used locally, it is now generally discarded as cheap synthetics from China are easily available. There appears to be a strong cultural aversion to butchering of animals (except chickens) within villages, therefore animals are taken live to main towns, sold, butchered and some meat occasionally taken back to the village. Chickens are largely for local consumption not sale, so little or no investment is put into feed and vaccinations.

Most pulses are bulked through an extensive value chain for sale in India, however some are retained in villages for consumption, and there is scope to look at value addition through local trade between villages and townships. Above all, the program should focus on reducing poverty and improving food security by adding local value and improving value chains for cash crops, also considering broadening the crop range to take advantage of new market trends such as the melon trade.

Water availability is a critical issue in the dry zone due to low (for Myanmar) and irregular precipitation, and poor soil water retention. Domestic water supply is the most urgent issue to be addressed by the program, with nearly all villages in the project zone experiencing drinking and livestock water shortages for several months of the year. This has impacts on human health through water quality issues (use of unprotected sources shared with livestock) and on poverty through expenses incurred to pay for deep well pumping, transport from

6 remote locations and opportunity costs related to procurement. Most villages rely on a combination of basic rainwater ponds, seasonal shallow wells and limited deep tube wells (70-100 meters).

Ponds have been constructed over the past two decades by the government, while a large number (700) have been built in the last few years by Proximity Designs. While the effort is to be commended, the lack of technical expertise in their construction implies that they are often poorly sited and fail to capture large amounts of runoff, there was no effort made in lining or compaction, and given the sand and gravel soils water often runs out as quickly as it flows in, and spillways are poorly placed, leading to overtopping and erosion of embankments in periods of heavy rain. Villagers tend to prefer pond water for taste issues over groundwater, despite the fact that they are normally unfenced and have livestock ranging freely in them. While location is not easy to improve, much could be done in terms of basin compaction or even lining in places where clay is available, and spillways can be improved. Fencing with traditional materials is always to be preferred over barbed wire, which will in general be rapidly put to other uses. Rehabilitation work may include seepage reduction by soil compaction, sediment removal, and pond enlargement to increase capacity, embankment restoration, and increasing inflow from runoff. Rain water harvested in the ponds can also contribute to groundwater recharge, which benefits local vegetation and well flow.

Tube wells have been installed by governmental and non-governmental actors over the years, and generally located within the village monastery or compound of a wealthy person. Depths range from 30-100 meters, and are reliant on a down hole pump powered by a generator. The main complaint relating to many tube wells is the high salinity of water, which is reported to be used only for washing even in drought periods, when villagers travel long distances by bullock cart to fetch water. Tube wells also carry substantial costs as the “owners” at the very least charge for generator fuel costs and maintenance. Some villagers reported spending up to 20% of their income on water throughout the year. Shallow wells (5-30 meters) are generally operated by hand pump and are less saline, but are unreliable in the dry season. Riverbed farming makes use of very shallow wells (3-6 meters) that are hand dug and lined with woven bamboo pipe, with water lifted by balance pole.

Many villages are also reliant on a wide network of springs, some permanent and some seasonal, to which they travel by foot and bullock cart. Recent efforts by agencies such as Habitat and UNICEF have focused on enclosing such springs and piping the water to villages, even up to distances of a mile, with tanks, sand filters and tap stands at the village end. Such gravity fed systems are excellent provided that the management and maintenance component is adequately covered through a village committee that can ensure maintenance and management through a user fee system.

It would be useful to determine the actual salinity of village wells through testing, in order to determine whether it is an issue of taste or human health concern. Regardless, desalination remains a complex operation for low input systems.

The bottom line for water interventions should be that they are individually adapted to each village, based on a careful mapping of water resources, local consumption patterns and seasonal flows. They should take into consideration the cost-effectiveness of different solutions especially considering long term sustainability without external financial subsidy. Solutions should therefore be analyzed from a social and economic perspective, rather than only from an engineering perspective, as is often the case.

Agriculture water availability improvement does not provide many opportunities in this area due to seasonal and topographical considerations. Monsoons generally end in late October, and there is no more rainfall until the next May. While storing water to compensate for irregular first monsoons would make sense, keeping large volumes of water in small lakes or unlined open ponds for 7 months is difficult to imagine. By the onset of the monsoon there is no freestanding water remaining. It might be possible to extend the growing season for small scale vegetable crops for a few months beyond the monsoon in places where topography and soil permit, but these are likely to be limited. One interesting area would be the use of catchments for supplemental water in the July dry spell between the main monsoon cycles. Critical cash crops such as sesame often wither and fail in this period, and a limited amount of irrigation water could mean survival of the crop until the second monsoon arrives.

Soil and water conservation practices are important in the sustainability of rainfed agriculture in the Dry Zone. These technologies include improved water and soil moisture management for increased crop water productivity and soil fertility management. There are a series of practices that may be explored such as low tillage, bunding, vegetative cover, ways of reducing soil erosion and keeping the top soils in the fields, and other means of allowing more water infiltration during floods and periods of high surface runoff. Deep rooted crops, crops with shorter growing seasons, and more drought tolerant crops will also be helpful.

Pumping from tube wells is currently beyond the scope of current agricultural practices in terms of return on investment, due to the depth of pumping and related fuel and equipment cost, and the limited returns on agriculture produce. This may change in the future with improved value chains, lower transport costs and higher value crops. Most water table depths are far beyond the range of treadle pumps or even hand pumps, while some experiments have been carried out with solar panel powered pumps. The volumes of the pumps however suggest more usefulness for livestock water or perhaps vegetable gardens. It may be important to explore opportunities for sand dams Dry sandy drainage or creek beds are everywhere in the Dry Zone, and sand could be a good option for storing up water after the water is dried up in the creeks. Sand dams are simple to build and are effective for DWS or may even be used potentially for supplemental irrigation on small areas.

Livelihood-related social protection

To complement the productive activities supported in the target villages, the program would support community-led livelihood related social protection initiatives, aiming to reduce vulnerability to climate variability and other shocks and to build resilience. The initiatives would build on and strengthen the traditional social protection networks that exist within the

8 target villages, to benefit the most vulnerable households. The criteria for selection of those households would be defined by the target communities (VDCs) through participatory wealth ranking and needs assessment processes, while a community-level analysis of existing practices, capacities and feasibility, would help determine the most appropriate social protection interventions. Options could include:

 Emergency group saving funds, especially for urgent medical treatment of vulnerable pregnant women and young children  Village-level rice/grain banks, managed by the community (VDCs) with shared responsibility of collecting rice/grains and streamlining usage, to ensure that stocks are available in the village at all times.  Village-based livelihood revolving funds that would encourage savings among poor members of self-help groups, while mobilizing better off households to make donations, especially during cultivation time.

 Vocational training of landless people (with focus on female household heads, youth and seasonal migrants), to enhance opportunities to raise incomes sustainably. Training will be linked to the activities supported under the value chain component of the Program.

Currently, social protection activities are being carried out with varying degrees of sustainability in the Dry Zone. The approach of Action Aid’s Socio Economic Development Network (SEDN) provides good examples of the variety of interventions that could be considered.

The approach adopted will seek to align as far as possible with existing community level institutions (both formal village authorities and informal councils of respected elders) while at the same time fostering inclusive democratic processes, to ensure the participation of women, poor, youth and elderly. Given the focus of the sectors recommended by the mission, the project would not seek to deliver on a fully demand-driven set of activities. Rather, it would respond to requests within a closed menu of well-defined areas of intervention.

Cross cutting issue of Gender:

Given the disadvantage faced by rural women in accessing assets, productive resources and services, their limited participation in community (and household) decision-making processes, their lower wage earning power and their weaker capacity to cope with shocks, the Program will align itself with the LIFT gender strategy and make special efforts to address gender inequalities as an important determinant of poverty and household food security.

Vulnerable women were found to typically include: heads of single-headed households, members of landless or smallholder (less than 2 acre) households without reliable income sources, members of large households with many dependents (young children), single women who lack family/community support and young female seasonal migrants. These would be

9 targeted specifically with activities to build their assets, enhance their farming and vocational skills, increase their income opportunities and strengthen their voice in decision making.

Government engagement

The mission was very pleased with the level of engagement with Government institutions, which for this mission were limited to the Township and National level. In both levels the mission found Government interlocutors to be open and eager to engage in discussions surrounding the program, and to offer support in implementation. At the Township level the Planning Office showed excellent levels of familiarity with their territory and with development conditions, providing indications that were borne out by field verification. They should be considered one of the primary sources for geographical targeting of project areas, with further validation provided by field visits. At present the main limitation on greater involvement of Township officers (Agriculture, Planning, Rural Development, Industrial Crops etc.) is their relative lack of outreach capacity in terms of staffing and budgets for transport. The program should consider ways in which to support such capacity to better engage.

During the mission the team was made aware of a specific request by the Ministry of Agriculture for the LIFT dry zone program to engage in building the seed sector. The team agrees that this is an area that will need considerable work, and where there is scope to increase production and productivity, and recommends that consideration be given to a comprehensive analysis of the seed security system in the dry zone (for key crops), in order to inform development directions for seed production and trade, building on the National Seed Policy being finalized.